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Financial year 2014 is coming to and end and it is time to start thinking about filing annual reports to the Commercial Register. Businesses should be aware that the Commercial Register is devoting increased attention to whether companies’ equity meets legislative requirements.

Maintaining proper accounting on transfer prices and documenting the reasoning for conformity to market value is in the interests of every enterprise, as it avoids tax risks. In preparing documentation, the requirements of legal acts should be considered along with the specific company’s risks and needs.

Another change has been made to the Value Added Tax Act, under which, starting 1 December of this year, only 50% of the input VAT on cars and car-related expenditures may be deducted.

Many companies in the process of preparing annual reports for the last year find themselves facing the need to recognize transactions between related parties.

The Value Added Tax Act sets forth four categories of goods or services on which a taxable person can voluntarily impose VAT. In general these cases involve tax-exempt supply, but VAT can also be imposed on the sale of these goods or services if the tax authority is notified of this in advance in writing. At first glance, it may seem curious why anyone should want to impose VAT voluntarily only to forward the tax to the state, but there is a reasonable explanation.

Until the beginning of 2015, the procedure set forth in Section 43 of the VAT Act for imposing VAT on electronically supplied services applies only to third-country persons engaged in enterprise. In accordance with the rules valid up until the end of 2014, it is possible to apply special procedure for VAT taxation of electronically supplied services (referred to in this guide simply as “special procedure”) on condition that the service is supplied by a third-country person engaged in enterprise that is not registered in any Member State as a taxable person (referred to hereinafter as third-country taxable person) to an EU Member State person that is not registered as a taxable person or limited taxable person – i.e. to an end consumer, usually an individual.

Businesses have always had two ways of obtaining the use of an asset – they either buy it outright (often borrowing to do this) or they rent it under a lease. In both cases they have the opportunity to use the asset how they wish, generating a return from the product(s) produced and facing similar risks (repair, obsolescence, damage etc.).

1 December saw an amendment to the Value-Added Tax Act enter force that does away with the term “sõiduauto omatarve” (own use of a passenger car). With a restriction placed on input VAT deductions, there is no longer a need to impose value-added tax on private consumption. Thus the general rule is that VAT will no longer be imposed on use of a company car for a non-business-related use; instead, the right to deduct input VAT will be curtailed.

Estonia is the first country in the world to establish a digital ID system where any foreign national can apply for an electronic identity in Estonia. This is a unique solution anywhere in the world and will allow foreigners to use many of Estonia’s e-services anywhere in the world.

During 2014 a number of tax changes have taken place and in 2015, key tax changes in a number of fields lie ahead.

Starting on 10 February 2015, all circumstances that enable a company to make income tax-exempt disbursements to shareholders or partners in the future must be declared.